AutoZone reported net sales of $3.2 billion for the first quarter of its fiscal 2021, a nearly 13% year-over-year increase.
Domestic same-store sales for the quarter, which ended Nov. 21, were up 12.3%. Net income was $442.4 million, a 26.3% year-over-year increase.
While AutoZone posted double-digit percentage increases for pretty much every financial metric compared to its first quarter of fiscal 2020, its fourth quarter of fiscal 2020 was a tough act to follow. In the fourth quarter, AutoZone reported a 21.8% jump in domestic same-store sales – a company record. Still, company leaders were pleased with the first-quarter numbers.
“In Q1, we felt we would see substantial above-normal growth, but we wouldn’t have thought double-digit same-store sales,” AutoZone CEO Bill Rhodes said of the company’s expectations heading into its first quarter. Regarding the difficult task of forecasting in the year of COVID-19, Rhodes added: “We’re continuing to learn as we go.”
During the company’s fiscal Q1 conference call, Rhodes illustrated the volatility of the first quarter by sharing the “same-store sales cadence” for each four-week chunk of the quarter. According to Rhodes, same-store sales were up 16.5% year-over-year in the first four-week period, up 11.4% in the next four-week period and up 8.8% in the last four-week period.
“The deceleration appears to be related to a combination of normal seasonality, and how far away we were from the benefits of economic stimulus,” Rhodes explained. “ … While our enhanced sales growth declined over the quarter – to still-historically high levels – we believe the noise around the election, the reemergence of COVID in many areas, and the beginnings of seasonal weather patterns hurt foot traffic, particularly in the last four-week period.”
That said, the company made “significant progress” in boosting its in-stock levels, Rhodes noted.
“Last quarter, we talked about the pressure our supply chain was experiencing to make sure we were in stock and replenishing the stores on a timely basis,” Rhodes said. “ … Our in-stocks are much-improved, and our supply chain and most of our vendor partners have done an exceptional job in reacting to the unprecedented surge in volumes that have now lasted six-plus months.
“The progress has been significant, but at the end of the quarter, we had only closed about half of the gap from our depths to our normal levels of in-stock.”
Fiscal first-quarter sales to DIFM customers increased nearly 12% to $695.3 million, representing 22% of AutoZone’s total sales. CFO Bill Giles noted that U.S. weekly sales per commercial program were $11,500, up 9.2% on a per-program basis.
“Not only was $11,500 per week the second-highest average ever for us, but we were able to average $58 million in total commercial weekly sales, another near-record and a tremendous accomplishment for our teams,” Giles added.
With only 4% of the DIFM market, AutoZone has been focused on making inroads with repair shops. Based on overall industry data from the Auto Care Association, Rhodes and Giles insisted that AutoZone is gaining market share.
“Fundamentally, we believe that our share gains are underpinned by the investments we made in improving the quality of our parts offering – many in the Duralast brand – improvements in our parts coverage by model year, and in commitment to providing exceptional service,” Giles asserted.
Adding “megahubs” with expanded inventories has been a linchpin of AutoZone’s DIFM strategy. The company opened three new megahubs in the first quarter, bringing the total to 47.
“These stores substantially increase local market availability, and we see a meaningful lift in sales in the markets where they open,” Giles noted. “With over 80,000 SKUs or more, we deliver same day and often multiple times a day to stores in megahub markets. This means a store can say, ‘Yes, we have it,’ significantly more than when they are sourced from a hub that carries 40,000 to 50,000 SKUs.”
